To find growth investments, you may have to look far from your home

If you can't depend on your home equity increasing during a US housing downturn, where do you turn for growth?

US bonds offer cold comfort. With ultra-safe six-month Treasury Bills yielding as much as 5 percent, your real return is paltry after inflation and taxes.

US stocks? The specter of a housing recession, consumer slowdown, and more ugly surprises in the subprime mortgage market weigh heavily on Wall Street now. That leaves a compelling investment typically neglected by most investors: non-US stocks with high dividends.

If you haven't considered how the global economy is propelling emerging markets, it's time to take a hard look.

China and India, of course, grab the headlines, with gross domestic product growing at 11 percent and 9 percent, respectively. Then there's Argentina, at 8 percent. Even at 4.3 percent, Brazil's economy is accelerating twice as fast as the US economy, with a healthy 2.25 percent budget surplus to boot.

Before the case is made for cash-rich companies overseas, there needs to be an honest accounting of the state of the US residential real-estate market.

Massive equity deflation may be taking place. Fueled by cheap mortgage money, low lending standards, and the willingness of Americans to plunge ever deeper into unsustainable debt, the housing market was due to hit the brakes.

Banks and brokers lent with abandon, including to millions who were one interest-rate increase away from foreclosure in subprime mortgages.

As Peter Schiff, an investment adviser in Darien, Conn., says:

"Wall Street may be able to buy some time by bailing out troubled hedge funds to keep their worthless subprime mortgage investments off the market, but no such safety nets exist for strapped consumers looking down the barrel of resetting adjustable rate mortgages."

When supplies exceed demand in a time of rising rates, it could be years before the housing market grows again.

While home financing is still relatively cheap by historical standards, it has climbed over the past year. The average 30-year loan rate was 6.6 percent through July 5, according to Freddie Mac.

If you were fortunate to lock in a mortgage in June 2003, you could have received a 5.2 percent, 30-year fixed-rate loan, the lowest rate in a generation. As recently as June 2005, a five-year adjustable mortgage averaged about 5 percent.

In addition, Americans took cash out of their houses from sales, home-equity loans, or refinancing. From 1991 to 2005, property owners extracted about $530 billion annually, spending about $66 billion a year on personal expenditures, according to a Federal Reserve study. Millions who were banking on endless appreciation are now finding they are deeper in debt, with little equity.

What if your home equity doesn't grow through market appreciation? Wouldn't that damage nest eggs for those whose largest source of wealth is the value of their house?

Diversifying away from the US home, stock, and bond markets is a reasonable alternative to build wealth.

Companies that pay consistent dividends in growing economies are worth considering. Dividends are earnings that are paid back to shareholders and are bonuses only from the healthiest, established corporations.

The Alpine Global Dynamic Dividend Fund invests 80 percent of its assets in companies that pay dividends. This year, the new closed-end fund has beaten the Standard & Poor's 500 Index by about 11 percentage points through July 5, with a 12 percent return.

A more established choice is the Fidelity International Discovery Fund, which focuses on non-US stocks that pay dividends and show potential for capital appreciation. The fund was up 14 percent through July 5.

None of these returns are guaranteed, and you need to understand they carry additional currency and market risk. They should be long-term holdings.

The best strategy is to ensure you are getting growth from somewhere. For that, you may have to look far from home.